Glass-half-empty people generally do not run airlines; as the old saying goes, the industry has never made money. Like most old sayings, that one is not strictly true – but it is fair to note that “airlines” and “troubled” often go together.
As Flight International’s survey of the world airliner fleet highlights, the industry right now is healthy enough but slowing down, as a long-standing economic recovery threatens to run out of fuel while world events keep financial markets on alert. There are three possible near futures, none very good for airline economics. One, characterising widespread recession, is that oil stays cheap, interest rates stay low and air travel demand growth stays positive with help from ticket price discounting. A second is that government and central bank policy keeps the world economy more or less on its current track – so while the oil price keeps edging up, interest rates stay low and demand growth stays positive but weak; here, airlines retain some pricing power but, over time, operate at borderline break-even.
The third possible outcome is much worse. War in the Gulf is not so unlikely and, if it happens, will be wildly disruptive. Think very high oil prices and severe disruption of air traffic.
The last two great aviation downturns followed huge external shocks. The financial crisis of 2008 hit airlines hard but growth returned rapidly. After the 9/11 attacks, the industry plunged into loss and stayed in the red until 2006.
Today, it is fair to say that background events look like some mix of 2001 and 2008. Half-empty worriers and half-full optimists might agree that fleet development and business expansion should be the least of their concerns. Tending carefully to execution of the basic business of flying is the order of the day.
Source: Flight International
